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New funding mechanism mooted

Proposal to apportion Rs.250 crore from ADB aid as funds for local bodies

The aim is to provide easy funds for local bodies

The proposed fund will have a governing body

THIRUVANANTHAPURAM: The Government is planning to set up a permanent autonomous funding system to provide soft loans for local self-Government institutions (LSGIs) to undertake development and welfare projects.

Local Administration Department sources told The Hindu that the proposal was to apportion a sum of Rs.250 crore from the Asian Development Bank (ADB) assistance to the State for constituting the revolving fund.

The main aim was to provide easy finance to Corporations, municipalities and panchayats for taking up innovative projects. The unutilised funds of the Kerala Urban Development Finance Corporation (KUDFC) and the Rural Development Board (RDB) too would be utilised for setting up the new fund. Altogether it was expected to have a corpus of Rs.350 crore in the beginning itself. This would almost be similar to the own fund of the civic bodies, sources said.

The proposed fund would have a governing body headed by the Chief Minister and comprising other Ministers. The Local Administration Minister would be the vice-chairman of the governing body. The governing body would have the status of a Cabinet sub-committee and hence its decisions to clear projects and award financial assistance can be done without any impediment, sources said.

The assistance provided by the KUDFC and the RDB was not sufficient for the civic bodies to take up development projects. The KUDFC was depending on bank finance to assist LSGIs and consequently the rate of interest was not so reasonable. Hence, most civic chiefs were reluctant to avail themselves of the assistance provided by the KUDFC, sources said.

In spite of getting substantial Plan funds, LSGIs were compelled to shelve many ambitious projects for want of funds.

On providing easy finance, they would be willing to take up novel projects such as solid waste management, providing better health and sanitation facilities and also improve the quality of education in schools that had been handed over to them following the decentralisation of powers.

The Government would soon evolve the structure of the governing body and also the norms for clearing projects and granting loans without any administrative wrangles.

By providing easy finance, LSGIs will not be forced to depend on ADB or World Bank assistance in future for their development and welfare projects, sources said.